The Cyprus Securities and Exchange Commission (CySEC) announced today that it has imposed a fine of €225,000 on XFR Financial Ltd, owner of forex brokers XForex and XTrade, for a series of non-compliance issues in connection with the provision of trading services.
The violations relate to the Investment Services and Activities and Regulated Markets Law and Directive DI 144-2007-01 which govern the authorisation, operating conditions and professional competence of CIFs.
Commenting to Finance Magnates a spokesperson for the company stated: “We wish to emphasize that the penalty imposed by CySEC was levelled against XForex. Since rebranding, we have implemented even stricter procedures, updating our operations manual to comply with every aspect of CySEC regulation. The stricter procedures will ensure that the oversight for which XForex was penalized will not occur again.”
“We value our relationship with CySEC, with whom, before this incident, we hadn’t had any problems regarding compliance and regulations,” the official statement concluded.
XForex is a brand that XFR Financial has already phased out with the company not having any plans to resurrect the brokerage.
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Breakdown of Fines
The administrative fine imposed by CySEC has been broken down, with €70,000 payable for non-compliance of the law regarding the provision of investment services and advice without authorisation.
A further €10,000 was imposed as the firm’s compliance function did not establish, implement and maintain adequate policies for the detection of any risk of failure to comply with its obligations.
In addition, €10.000 was imposed for failing to comply with authorisation and operating conditions. According to CySEC, the internal operational manual had weaknesses and the company did not apply in practice all that was provided for in the internal organisational manual.
A further €40,000 was levied for the failure to act fairly, honestly and professionally in accordance with the best interests of its clients in granting a trading bonus and in relation to the practices applied in this context.
Finally a total of €95,000 was imposed for a combination of violations including misleading marketing communications which were not fair and clear, inappropriate information provided to clients and potential clients relating to the nature and risks associated with the investment service, and failure to ask clients to provide all the information required or to assess the compatibility of the investment service or financial instrument as per their requirements.
This is not the first time that XForex has come under regulatory attention. Canada’s BCSC added XForex to its Investor Caution List for soliciting local residents.